Friday, February 26, 2010

Bloomberg Over-Accentuates the Positive

In its article U.K. Exits Recession at Faster Than Estimated Pace, Bloomberg.com continues to push the rosy scenario. For example, only at the very end of the piece does the reader find that just last week, the Bank of England lowered its growth forecast for 2010 from 2.2% to 1.4%. (Presumably that growth forecast may now be lowered further, given a higher than assumed baseline for the level of economic activity throughout the fourth quarter.)

In any case, the article begins with the sunny side:

Britain emerged from recession at a faster pace than previously estimated in the fourth quarter as services output jumped, providing a boost for Prime Minister Gordon Brown as he prepares for a general election within weeks.

Gross domestic product rose 0.3 percent from the third quarter, compared with a previous calculation of 0.1 percent growth, the Office for National Statistics said today in London. The median forecast in a Bloomberg News survey of 27 economists was for a 0.2 percent increase.

Am I excited? Hardly. Economists had already sniffed out that the initial estimate was too low. So we are talking about a further one tenth of one percent in a very large economy. In any case, much economic effort in Britain is off the books in any case, and economists are still discussing and revising the level of the economy in 1983 (true). So this headline really is about nothing.

Nonetheless, after a paragraph on politics, the article continues to make much of very little:

“Today’s figures should help to alleviate some of the gloom and uncertainty that descended on markets about U.K. economic prospects,” said Philip Shaw, chief economist at Investec Securities in London. “It will help Brown. We’ll see a slow and steady momentum building up in growth through 2010.”

Huh? Gloom and uncertainty will be alleviated because a revision came in a whopping 0.1% above expectations? And note the final quote. Rather than the BOE's downward revision for 2010 growth being a bad thing, Mr Shaw, one of the zillions of hired gun economists whose job is to help their employers sell and trade securities for their private profit and not for your benefit, puts a happy face on slow growth. Slow and steady. Words designed specifically to connote stability. Isn't it great to be steady?

Meanwhile the article makes clear that Britain can go the way of Greece into forced austerity:

At more than 12 percent of GDP, Britain’s budget deficit is on a par with that of Greece.

The other important trick the article uses is to bury bad news that directly affects the main message (i.e., happy days are here again):

Revisions to previous quarters meant that the economy shrank 6.2 percent since the first quarter of 2008, making the recession the deepest on record. Oh. Glad you told us this, buried deep in the body of the article.

The economy grew faster than expected in the last three months of 2009, but the 18-month recession from which it emerged proved to have been even deeper than previously thought. . .

The Office for National Statistics revised up its first estimate of fourth quarter growth to 0.3 percent from 0.1 percent, but calculated that a total 6.2 percent of output had been wiped out during the recession, more than the 6.0 percent first thought and the deepest in over 50 years.

Gilt futures fell modestly after the data, which is likely to provoke mixed reactions at the Bank of England. The Bank expected an upward revision to Q4 growth but will now judge there is even greater slack in the economy pulling down on inflation.

"I don't think we're out of the woods," said Adam Chester, economist at Lloyds TSB Corporate Markets. "The first quarter is now going to be the focus and given the weak January we have had and the bad weather, there is still a distinct possibility that we could dip back into the red in the first quarter."

The way Bloomberg and Reuters report the exact same news is as if two political parties were spinning a debate between their candidates. Same debate, different interpretations.

Even if you trust government economic statistics, you need to be very careful about being manipulated toward the point of view the media wants you to have.